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Bush and Lula discuss biofuels

Talks follow up a memorandum of understanding to promote international ethanol.

31 Mar 2007 22:16 GMT

The US and Brazil are two of the main players in the so-called Doha round of world trade talks [AFP]

Dan Fisk, the US national security council's senior director of western hemisphere affairs, said on Friday: "What the two presidents want to review is where we are and what needs to be done and what President Bush and President Lula can do to move forward."

Ethanol alliance

The two leaders' talks on ethanol will follow up a memorandum of understanding to promote international ethanol that the two nations signed when Bush visited Brazil on March 9.

Fisk said the two hoped to announce a handful of Caribbean and Central American nations that will be the beneficiaries of pilot programs for biofuels development.

The US obtains ethanol mainly from corn whileBrazil gets its from sugarcane [Reuters]

But Silva on Friday reiterated Brazil's position that the alternative fuel will not gain traction worldwide unless the US drops a $0.53 per gallon tariff on Brazilian ethanol.

He wrote in The Washington Post: "The subsidies provided under America's corn-based ethanol program have spurred an increase in US cereal prices of about 80 per cent."

The promotion of ethanol could eventually help the US reduce its demand for foreign oil, officials say, lessening the energy dependence on volatile Middle Eastern nations and Venezuela.

But a potential source of friction emerged on Friday after US officials expressed concerned about investments that Brazil's state-owned oil company reportedly plans to make in Iran.

'International interest'

The US embassy in Brazil said: "We think foreign investment in the petroleum and gas sectors in Iran is contrary to the international interest of pressuring the Iranian regime to accept its international obligations, suspend its [uranium] enrichment-related and reprocessing activities."

The embassy released the statement after Brazil's Valor Economico business newspaper reported that Clifford Sobel, the US ambassador, recently warned Sergio Gabrielli, chief executive of Petroleo Brasileiro SA, that its plans for Iran could cause complications for the company's petroleum drilling activities in the Gulf of Mexico.

The Iranian oil ministry's information network, Shana, reported in early March that Petrobras will sign a $470 million contract with Iran to develop Caspian Sea oil reserves.

Petrobras has not confirmed the contract and only says it is in talks with Iran.

Besides its reported plans to invest in the Caspian, Petrobras, together with Spanish energy firm Repsol-YPF, won a tender for exploration at the Tosan Block in the Arabian Gulf, Shana reported.

The companies plan to invest $35 million for exploration drilling at Tosan, Valor Economico said.